EV charging stations planned for AK road system; Cantwell online

page

5

l E X P L O R A T I O N & P R O D U C T I O N

l E X P L O R A T I O N & P R O D U C T I O N

Vol. 26, No. 38 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of September 19, 2021 • $2.50

l G O V E R N M E N T

Vol. 26, No. 2 September 2021

ArcticArcticCovering Arctic oil and gas operations

and the logistics, construction and service firms that support them

Oil & Gas Directory

Latest Arctic Directory released

see OIL PRICES page 8

Change in slow motion; green transition threatens Canadian jobs

Two years ago, in the last Canadian election, Prime Minister

Justin Trudeau made a promise that has turned out to be largely

empty.

He pledged that his Liberal government would introduce a

“Just Transition Act” to help workers and communities reliant on

the fossil fuel industry gain access to “training, support and new

opportunities needed to succeed in a clean economy.”

Since then all that’s happened has been a series of measures

— clean fuel standards, carbon taxes and increased talk of scaling

see GREEN TRANSITION page 10

Oil rockets higher; US crude stock downturn above analyst estimates

Alaska North Slope crude and Brent crude leapt into the upper

$70s Sept. 15, while West Texas Intermediate rocketed 3.1%, or

$2.15, to close at $72.61 per barrel. ANS moved up by $1.77 to

close at $75.59, besting Brent’s closing price of $75.46 — up

$1.86 on the day.

The gains brought the indexes near the highs of July. ANS was

just 28 cents below its July 31 close, a dramatic turnaround after

having suffered a 5.9% correction in August.

Sept. 15 action marked the fourth day of gains, following a

see TAKEOVER TERMS page 10

Oil Search, Santos agree on takeover terms; target mid-Dec.

In a joint statement Sept. 10 Santos and Oil Search said that

they have entered into a definitive agreement to merge the two

companies into a “regional champion” in an all-scrip transac-

tion. They expect the deal to be finalized in mid-December.

Merging the companies will create an oil and gas company

with a market value of around $15 billion ($21B Australian

dollars) and unlock between $90 million and $115 million in

pretax savings each year, they said.

Oil Search’s board unanimously approved the transaction

88E lone explorer? One exploration well definitely planned for Alaska North Slope this winter

By KAY CASHMAN Petroleum News

One oil and gas exploration well is

being planned for Alaska’s North

Slope this coming winter, and that is 88

Energy’s Merlin 2 well.

There is an outside chance (no confir-

mation yet) that Eni US Operating Co., a

subsidiary of Italian multinational Eni

S.p.A., will spud its second Nikaitchuq

North extended reach exploration well in second

quarter 2022. The Alaska Beaufort Sea prospect is

in a federal OCS unit, Harrison Bay block 6423,

which is approximately 6 miles from the Spy

Island Drill site in the state of Alaska

Nikaitchuq unit.

In its 14th plan of development for the

Nikaitchuq unit, which runs from Oct. 1

through Sept. 30, 2022, operator Eni told

Alaska’s Division of Oil and Gas that

facility upgrades will be completed to sup-

port the planned Nikaitchuq North explo-

ration well.

NN-02 was supposed to be drilled this

coming winter unless Eni requested anoth-

er extension from the feds. No word on that yet.

ConocoPhillips, the North Slope’s most consis-

tent explorer, will not drill any exploration or

NPR-A plan review BLM assessing if the plan meets Biden administration environmental policy

By ALAN BAILEY For Petroleum News

The Department of the Interior has issued a

memorandum stating that it has instructed the

Bureau of Land Management to re-evaluate the

current NPR-A integrated activity plan and its

associated environmental impact statement. The

documents in question were approved by the

Trump administration at the end of December

2020.

The memorandum, dated Sept. 7, appeared in

conjunction with a court filing in one of two

appeals in the federal District Court in Alaska chal-

lenging the legality of the IAP. The court cases

have both been stayed while the DOI staff of the

Biden administration review the IAP.

The IAP in question sets the current rules for

what land within the NPR-A can be included with-

in oil and gas lease sales. When issued, the IAP

increased the land area available for leasing from

11,763,000 acres to 18,581,000 acres relative to

the previous IAP. Land newly opened for leasing

included land within the Teshekpuk Lake Special

Area, an area that includes important breeding

Hilcorp works CI assets Monopod pipe work complete; P&A, drilling at NCI; new MGS pipelines in ’22

By KRISTEN NELSON Petroleum News

L uke Saugier, senior vice president of

Hilcorp Alaska, and three of the

company’s Cook Inlet managers updated

the Cook Inlet Regional Citizens

Advisory Council board of directors on

the company’s activities in Cook Inlet

Sept. 10.

In a general update on the company’s

Cook Inlet business, Saugier said the company

employs some 150 and Cook Inlet will continue to

be an important part of the company’s Alaska busi-

ness.

Hilcorp began operating in Cook Inlet in 2012,

first acquiring assets previously held by

Chevron, then Marathon’s gas fields and

most recently the North Cook Inlet field

from ConocoPhillips.

The company’s efforts are going to

focus on delivering natural gas to local

markets, Saugier said, particularly from

the Steelhead and Tyonek platforms,

where Hilcorp will be drilling wells for

years to come. He said there are tremen-

dous gas resources that Hilcorp will con-

tinue to develop to supply the local market.

Hilcorp is the major Cook Inlet natural gas

provider, owning the majority of the fields and

operating the fields it owns as well as the Beluga

see EXPLORATION WELL page 11

see NPR-A PLAN page 10

see HILCORP ASSETS page 6

ERIK OPSTAD

DOI requires BLM within 120 days to “provide the status of its evaluation and

related actions.”

LUKE SAUGIER

2 PETROLEUM NEWS • WEEK OF SEPTEMBER 19, 2021

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MEA PLANT

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Petroleum News Alaska’s source for oil and gas news

88E lone explorer? One exploration well planned for Alaska North Slope this winter

NPR-A plan review BLM assessing if plan meets administration’s environmental policy

Hilcorp works CI assets Monopod work complete; P&A, drilling at NCI; MGS pipelines in ’22

ON THE COVER

Oil rockets higher; US crude stock downturn above analyst estimates

Oil Search, Santos agree on takeover terms; target mid-Dec.Change in slow motion; green transition threatens Canadian jobs

ENVIRONMENT & SAFETY4 Study: 60% of O&G should stay in ground

4 US rotary rig count back up by 6 to 503

3 Alberta rides fiscal wave

7 Vermont sues, alleges false climate info

7 State sets dates for fall areawide sales

5 EV charging stations for AK road system

4 Hilcorp looking for Tyonek gas at Beluga

GOVERNMENT

UTILITIES

LAND & LEASING

FINANCE & ECONOMY

EXPLORATION & PRODUCTION

2 Hilcorp requests inlet royalty reductions

Division of Oil and Gas approves 5% royalty for oil production from Monopod Platform, denies reduction for Steelhead output

contents

l F I N A N C E & E C O N O M Y

Hilcorp requests inlet royalty reductions Division of Oil and Gas approves 5% royalty for oil production from Monopod Platform, denies reduction for Steelhead oil production

By KRISTEN NELSON Petroleum News

The Alaska Division of Oil and Gas has approved one

Cook Inlet royalty reduction request from Hilcorp

Alaska and denied a second.

The requests are based on a state statue which allows

lessees of oil fields offshore in Cook Inlet to pay a reduced

royalty rate — 5% vs. 12.5% — for production from a

platform if production is certified by the Alaska Oil and

Gas Conservation Commission to be less than 1,200 bar-

rels per day during the preceding calendar quarter.

The division said the statute applies where production

equaled or was more than 1,200 bpd and dropped below

1,200 bpd based on reservoir conditions, but not if the

reduction was due to mechanical factors, environmental

or facility constraints or market conditions.

Hilcorp applied for royalty reduction at the Monopod

and Steelhead platforms, both in the Trading Bay unit.

Monopod Platform The division approved royalty reduction at the

Monopod Platform.

The statute requires that the division determine “that

the reduction in production from the platform or the field

is based on average daily production during the calendar

quarter based on reservoir conditions, and not the result

of short-term production declines due to mechanical or

other choke-back factors, temporary shutdowns or

decreased production due to environmental or facility

constraints, or market conditions,” the division said in its

Sept. 9 approval.

Hilcorp told the division the Monopod production

decrease “was due to mechanical issues in the A-07 well

at the platform, as well as natural; decline of the existing

wells.”

The A-07 had been producing some 150 bpd.

“Even without the issue with the A-07 well, Hilcorp

estimates a 13.6% natural production decline rate at

Monopod.”

In its decision the division said it reviewed informa-

tion provided by Hilcorp and analyzed AOGCC produc-

tion data for all the Monopod wells and determined the

production decline at the Monopod was due to natural

decline, not mechanical or other factors. Hilcorp’s

decline rate places average daily Monopod production

below 1,200 bpd in both the fourth quarter of 2020 and

the first quarter of 2021, the division said, and the royal-

ty for Monopod oil production is reduced to 5%, retroac-

tive to the January2021 production month.

Steelhead Platform The division did not approve a royalty reduction for

oil production from the Steelhead Platform.

Hilcorp claims, the division said, that the production

decrease was primarily due to scale issues in the M-31B

well, ultimately leading to short-term production cessa-

tion from the well in the first quarter of 2021. Hilcorp

“Even without the issue with the A-07 well, Hilcorp estimates a 13.6% natural production

decline rate at Monopod.”

see ROYALTY REDUCTION page 3

By GARY PARK For Petroleum News

The Alberta government has turned its

fiscal clock back at least seven years.

But for how long is an open question.

Based on a lively first quarter, pointing to

economic growth of 6.7% for the current

budget year, accompanied by an increase in

overall employment of 5.2%, the province

has been able to stage a preliminary revival

from the pit of pandemic woes.

Not surprisingly, this startling update has

overhauled a tepid forecast laid out six

months ago and is based as it has been for

almost 70 years on robust oil and natural gas

revenues.

The new numbers, released by Finance

Minister Travis Toews, show returns from

non-renewable resources could reach C$10

billion in the 2021-22 fiscal year, compared

with the C$2.9 billion forecast in a February

budget.

Toews said the deficit is still on track for

C$7.8 billion compared with the original

target of C$18.2 billion.

He summarized the outlook in a few

words: “Economic growth is exceeding our

expectations. Global demand for oil has out-

stripped supply, meaning oil prices are

stronger than expected.”

The budget details had been preceded a

month ago by news that oil output in Alberta

had surged past its 2019 peak before the

pandemic disruption and collapse of energy

prices.

ATB Economics said production aver-

aged 3.53 million barrels per day in the first

half of 2021, up 5.7% from the same period

of 2020 and 1.8% better than the same peri-

od in 2019.

The vast majority — 86% — was attrib-

uted to oil sands extraction.

“On the oil sands side, we’re seeing

facilities that have been potentially under-

utilized over the last two and a half years run

up on production capacity,” said Kevin

Birn, vice president of Canadian crude oil

markets for the research and analysis firm

IHS Markit.

ATB Economics said the upswing is the

continuation of a long-term trend, with vol-

umes now 86.2% above where they were in

2010.

Exports up The amount of oil being exported from

Alberta to other provinces and other coun-

tries (dominated by the United States) is

also climbing fast, up 4% in this year’s first

half and 1.7% higher than in 2019.

The dollar value of exports for the six

months was up C$9.7 billion, 36.8% above

the first half of 2020, ATB Economics said.

However, Alberta is not yet ready for a

celebration.

Overall revenue forecasts for the current

fiscal year are C$55 billion, C$11 billion

more than predicted, but expenses are

pegged at C$62.7 billion, more than expect-

ed because of crop insurance payouts

caused by an extreme drought this summer.

Total taxpayer-supported debt is projected

to reach C$106 billion by March 2022, with

debt interest payments pegged at C$2.6 bil-

lion a year.

“Since we’re on the positive side of the

roller-coaster, but still facing a huge

upswing in the provincial deficit, this (turn-

around) couldn’t have come at a better

time,” said Mike Holden, chief economist at

the Business Council of Alberta.

University of Calgary economist Trevor

Tombe said Alberta has “been firmly on the

revenue roller-coaster for as long as any of

us remember. We can’t forget that an unex-

pected decline at some point may still hap-

pen.”

Along with the latest numbers, the gov-

ernment has set average commodity prices

of US$65.50 a barrel for crude.

“We’re not expecting to fully recover

until 2022,” said Toews, taking a familiar

line used by finance ministers. “We know

the next days, weeks and even months will

be bumpy from an economic standpoint.”

With that thought in mind, a new survey

of business owners and the public by the

Alberta Chamber of Commerce found that

“diversifying the economy beyond oil and

gas” is the top priority for 32% of respon-

dents. l

PETROLEUM NEWS • WEEK OF SEPTEMBER 19, 2021 3

a anepieeK g Alask

ssesinuor Bn feOp

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also attributed the production decline to

“an estimated 14.7% decline rate in the

West Foreland wells.” The company said

high decline rates at the West Foreland

wells are because they are solely produc-

ing on primary depletion with very limit-

ed injection into the West Foreland reser-

voir.

Hilcorp said the M-31B well was

treated with acid in April 2021 to remove

scale but the electric submersible pump

failed in May 2021.

The division said Hilcorp’s requested

effective date of April 1, 2021, for royalty

modification was based on first quarter

2021 decrease in production and does not

meet statutory requirements.

“The M-31B temporarily ceased pro-

duction in May 2021 due to a mechanical

problem with the ESP, which caused a

decrease in total Steelhead production

during the 2nd quarter of 2021. If the

ESP had not failed, the Division esti-

mates that 2nd quarter production would

have been greater than 1,200 BOPD,

which is also consistent with Hilcorp’s

submitted decline curve analysis.

Therefore, the Division finds that the

facts do not justify a royalty rate reduc-

tion to 5% for the Steelhead.”

The disapproval is based on the

decrease being due to a mechanical fail-

ure, the division said. l

continued from page 2

ROYALTY REDUCTION

l F I N A N C E & E C O N O M Y

Alberta rides fiscal wave Province rebounds from economic depths; resource revenues forecast to rise almost 4-fold; production climbs 5.7%, exports up 4%

“On the oil sands side, we’re seeing facilities that have been

potentially underutilized over the last two and a half years run up

on production capacity,” said Kevin Birn, vice president of

Canadian crude oil markets for the research and analysis

firm IHS Markit.

www.alaskasteel.com

6180 Electron DriveAnchorage, AK 99518

4 PETROLEUM NEWS • WEEK OF SEPTEMBER 19, 2021

ADDRESS P.O. Box 231647 Anchorage, AK 99523-1647 NEWS 907.522.9469 publisher@petroleumnews.com CIRCULATION 907.522.9469 circulation@petroleumnews.com ADVERTISING Susan Crane • 907.770.5592 scrane@petroleumnews.com

OWNER: Petroleum Newspapers of Alaska LLC (PNA) Petroleum News (ISSN 1544-3612) • Vol. 26, No. 38 • Week of September 19, 2021

Published weekly. Address: 5441 Old Seward, #3, Anchorage, AK 99518 (Please mail ALL correspondence to:

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Petroleum News and its supplement, Petroleum Directory, are owned by Petroleum Newspapers of Alaska LLC. The newspaper is published weekly. Several of the individuals

listed above work for independent companies that contract services to Petroleum Newspapers of Alaska

LLC or are freelance writers.

Kay Cashman PUBLISHER & FOUNDER

Mary Mack CEO & GENERAL MANAGER

Kristen Nelson EDITOR-IN-CHIEF

Susan Crane ADVERTISING DIRECTOR

Heather Yates BOOKKEEPER

Marti Reeve SPECIAL PUBLICATIONS DIRECTOR

Steven Merritt PRODUCTION DIRECTOR

Alan Bailey CONTRIBUTING WRITER

Eric Lidji CONTRIBUTING WRITER

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Judy Patrick Photography CONTRACT PHOTOGRAPHER

Forrest Crane CONTRACT PHOTOGRAPHER

Renee Garbutt CIRCULATION MANAGER

907.277.7555 | 1120 E. 5th Ave. Anchorage, AK arcticcontrols.com

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EXPLORATION & PRODUCTIONHilcorp looking for Tyonek gas at Beluga

Hilcorp Alaska has applied to the Alaska Oil and Gas Conservation Commission for

a spacing exception to allow drilling of the Beluga River Unit 223-24 well in the

Beluga River Sterling/Beluga Undefined Gas Pool and the Beluga River Tyonek

Undefined Gas Pool within the Beluga River field.

Hilcorp requested the spacing exception because there are multiple wells within the

governmental section where the well is proposed and there is a vertical ownership

change involved. There are no pool rules for the Beluga field, Hilcorp said, instead the

commission issues well spacing exceptions, 22 in the field since 1972.

The change in ownership issue arises because from the surface down to the bottom

of the Undefined Sterling/Beluga (also the top of the Undefined Tyonek), Hilcorp, the

field operator, has a 33.3% working interest ownership and Chugach Electric

Association has a 66.67% WIO. Below the top of the Undefined Tyonek, Chugach

Electric has a 100% WIO, meaning the wellbore will cross the ownership boundary.

Hilcorp said the well will target the Undefined Tyonek, but if the deeper sands in the

Tyonek “prove unsuccessful, it will move up hole targeting and testing additional sands

in the Undefined Sterling/Beluga.”

This will be the first well in the Beluga River field targeting production from the

Undefined Tyonek, Hilcorp said.

“All other existing wells within the Beluga River Field currently produce from the

Undefined Sterling/Beluga,” Hilcorp told the commission in its Sept. 13 application.

The commission has tentatively scheduled a public hearing on the request for Oct.

20 at 10 a.m. in its Anchorage offices but said the hearing would be held only if the

commission receives a written request by 4:30 p.m. Oct. 13, “indicating a significant

degree of public interest.” If, however, there isn’t a timely hearing request filed, the

commission may consider issuance of an order without a hearing. Information on the

hearing will be available on the AOGCC Events webpage after Oct. 13, the commis-

sion said.

—KRISTEN NELSON

l E X P L O R A T I O N & P R O D U C T I O N

US rotary rig count back up by 6 to 503

By KRISTEN NELSON Petroleum News

The Baker Hughes U.S. rotary drilling

rig count was at 503 the week ending

Sept. 10, up six rigs after an 11-rig drop

the preceding week when Gulf of Mexico

drilling closed down because of

Hurricane Ida. The count was up by 249

from 254 a year ago.

When the count dropped to 244 in

mid-August 2020 it was the lowest the

domestic rotary rig count has been since

the Houston based oilfield services com-

pany began issuing weekly U.S. numbers

in 1944.

Prior to 2020, the low was 404 rigs in

May 2016. The count peaked at 4,530 in

1981.

The count was in the low 790s at the

beginning of 2020, where it remained

through mid-March, when it began to fall,

dropping below what had been the his-

toric low in early May with a count of 374

and continuing to drop through the third

week of August 2020 when it gained back

10 rigs.

U.S. offshore rigs, a count which

includes the Gulf of Mexico, stood at six

Sept. 10, up by four from two the previ-

ous week and down by nine from 15 rigs

a year ago.

The Sept. 10 count includes 401 rigs

targeting oil, up seven from the previous

week and up 221 from 180 a year ago,

with 101 rigs targeting gas, down one

from the previous week and up 30 from

71 a year ago, and one miscellaneous rig,

unchanged from the previous week and

down by two from a year ago.

Sixteen of the rigs reported Sept. 10

were drilling directional wells, 461 were

drilling horizontal wells and 26 were

drilling vertical wells.

Alaska rig count unchanged The most significant week-over-week

change in state counts was Louisiana

(39), up by four rigs from the previous

week.

Texas (235) was up by three rigs and

Utah (12) was up by one rig.

Pennsylvania (17) was down two rigs.

Counts in all other states were

unchanged, week-over-week: Alaska (5),

California (6), Colorado (11), New

Mexico (82), North Dakota (22), Ohio

(12), Oklahoma (32), West Virginia (9)

and Wyoming (18).

Baker Hughes shows Alaska with five

rigs active Sept. 10, unchanged from the

previous week and up two from a year

ago, when the state’s count stood at three.

The rig count in the Permian, the most

active basin in the country, was up by four

from the previous week at 254 and up by

130 from a count of 124 a year ago. l

l E N V I R O N M E N T & S A F E T Y

Study: 60% of O&G should stay in ground

By DREW COSTLEY Associated Press Science Writer

Researchers who estimate how much

of the world’s coal, oil and natural

gas reserves should be left unburned to

slow the increase in climate-changing

gases in the atmosphere say even more of

these fossil fuels should be left in the

ground.

The researchers, from University

College London, say earlier estimates,

published in 2015, had to be updated.

They now calculate that nearly 60% of

the world’s oil and gas reserves and 90%

of the coal reserves need to stay in the

ground by 2050 to meet climate goals of

the Paris Climate Agreement.

Those limits would give the world a

50-50 chance of limiting global warming

to 1.5 degrees Celsius (2.7 degrees

Fahrenheit) compared to pre-industrial

times, according to their study Sept. 8 in

the journal Nature.

“We believe our new paper adds fur-

ther weight to recent research that indi-

cates the global oil and fossil methane gas

production needs to peak now,” Dan

Welsby, lead author and an energy and

environment researcher at the University

College London, told a news conference

Sept. 7. “We found that global production

needs decline at an average annual rate of

around 3% (through) 2050.”

It’s been long known that emissions

from burning fuels for electricity, trans-

portation and other uses are the chief

driver of climate change, pulling long-

buried carbon in fossil fuels out of the

ground and depositing that carbon into

the atmosphere as carbon dioxide.

Scientists say such heat-trapping gases

are causing sea-level rise and extreme

weather events around the world.

Previous study The last study like this was several

months before world leaders drafted the

2015 Paris accord and pledged to reduce

warming to well below 2 degrees Celsius

see RESERVES STUDY page 9

“We believe our new paper adds further weight to recent research that indicates the global oil and fossil methane gas production

needs to peak now,” Dan Welsby, lead author and an energy and environment researcher at the

University College London, told a news conference Sept. 7. “We

found that global production needs decline at an average annual rate

of around 3% (through) 2050.”

PETROLEUM NEWS • WEEK OF SEPTEMBER 19, 2021 5

l U T I L I T I E S

EV charging stations for AK road system GVEA announces first level 3 station at Cantwell while AEA sponsored program moves ahead for the Railbelt highway system

By ALAN BAILEY For Petroleum News

With Golden Valley Electric Association announc-

ing the startup of a new level 3 electric vehicle

charging station at Cantwell on the Parks Highway, and

with an Alaska Energy Authority sponsored program

moving ahead to install a series of level 3 stations on the

Alaska highway system, the high power charging station

availability needed for long distance travel on Alaska

roads is starting to appear. AEA has told Petroleum News

that a level 3 charging station planned for Homer as part

of the AEA program is expected to go into operation later

in September. The Cantwell station is located at mile

214.5 on the Parks Highway, while the Homer station is

at AJ’s OldTown Steakhouse & Tavern.

People who charge their electric vehicles at home for

local use typically do so overnight using a level 1 or

level 2 charger. A level 1 charger consists of a normal

120 volt power outlet, while a level 2 charger uses a

higher voltage to charge more rapidly. However, it takes

several hours to charge a vehicle using these types of

chargers. The more rapid charging required to top up the

battery for a driver during a long distance journey

requires a commercial level 3 charger that operates on

high voltage, three-phase power.

Alaska based Recharge Alaska partnered with charger

manufacturer Tritium to install the charging station in

Cantwell. Tritium has said that it will build a heated win-

ter enclosure for the charger, and has adjusted the charg-

er coolant composition, to accommodate the extremely

low temperatures that can occur at Cantwell during the

winter.

AEA funding During its Aug. 12 meeting the AEA board discussed

the status of its electric vehicle charging station program.

On June 14 the agency had announced that it was award-

ing around $1 million in grants for the installation of

electric vehicle charging stations on the state’s connect-

ed road system. The AEA funding comes from Alaska’s

portion of a settlement with Volkswagen over the com-

pany’s fraudulent manipulation of emissions testing on

its diesel vehicles a few years ago, and from the

Department of Energy’s State Energy Program.

Board Chairman Curtis Thayer told the board that the

eventual plan is to have chains of charging stations on

both the Railbelt highway corridor from Homer to

Fairbanks, and on the corridor connecting Glennallen,

Tok and Delta Junction. The first phase of the program,

now underway, with its $1 million in funding, addresses

the Railbelt corridor: $350,000 in funding remains to

address the other corridor, as a second phase.

The objective is to have a maximum distance of 100

miles between charging stations. Thayer said that AEA

had received applications to install charging stations at

all designated sites on the Railbelt corridor, except

Girdwood, Nenana and Fairbanks. As a consequence,

that target of a 100-mile maximum distance has been

met, except for the 110-mile distance between Fairbanks

and a station at Healy. One of the planned stations is at

Cantwell, so that, including the GVEA funded station,

there will ultimately be two stations in that area of the

Parks Highway.

In its request for proposals, AEA specified a mini-

mum charging power of 50 kilowatts for the charging

stations and made up to $100,000 in sponsorship funding

available for each station. In the event, all of the planned

charging stations will have power ratings of 50 or 60

kilowatts. Thayer said that it could take up to an hour to

charge a typical vehicle with this capacity of charger.

Although more powerful charging stations with shorter

charging times are being installed in some places in the

Lower 48, the vendors opted for this power of charger

for the Alaska system, Thayer said. The recently

installed GVEA-funded charging station at Cantwell has

a 50 kilowatt capacity.

Installation schedule According to AEA, charging stations are scheduled

for installation at Seward, Homer, Soldotna, Cooper

Landing, Anchorage, Chugiak, Trapper Creek, Cantwell

and Healy. The agency has told Petroleum News that the

installation of a number of the stations is being delayed

by several months because of COVID-related supply

chain issues, including microchip shortages. A level 3

charging station in Chugiak is now anticipated to go into

operation during the winter of 2022. A level 3 charging

station planned for the Dimond Center in Anchorage is

now scheduled for the summer of 2022. And, with the

exception of the charging station being completed in

Homer, all of the other charging stations should go into

operation in the spring of 2022.

Sean Skaling from Chugach Electric Association has

told Petroleum News that a level 3 charger requires a

480-volt, three phase power supply. The electrical trans-

mission system that approximately follows the Railbelt

highway routing has plenty of capacity to supply these

high power electric vehicle chargers. However, an elec-

tricity distribution system is needed to deliver the power

from the transmission system to a charger. Fortunately, it

appears that there are sufficient distribution systems

According to AEA, charging stations are scheduled for installation at Seward, Homer,

Soldotna, Cooper Landing, Anchorage, Chugiak, Trapper Creek, Cantwell and Healy.

see CHARGING STATIONS page 9

River field, jointly owned with Chugach

Electric Association.

As for the ultimate fate of Hilcorp’s

Cook Inlet facilities, Saugier said part of

the company’s vision is that it is the last

owner. He said it is not Hilcorp’s inten-

tion to sell to someone further down the

food chain.

That’s not going to happen, he said:

Hilcorp will be the final owner of the

assets.

Plugging the wells There are a lot of wells in Cook Inlet

that eventually need to be plugged and

abandoned, Saugier said, and Hilcorp is

going to begin methodically working

through that list and plugging and aban-

doning every year.

He said the company doesn’t want to

get to the end of field life with nothing

done and will do here what it has done in

other areas of the country where it works,

which is systematically plug and abandon

wells.

With the acquisition of BP’s North

Slope assets, the company acquired

inhouse expertise on rigless abandonment

that BP had used on the Slope, and will

bring that technology into Cook Inlet, he

said.

Hilcorp intends to extend the life of its

Cook Inlet assets as long as possible, par-

ticularly the platforms, Saugier said, call-

ing them remarkable from both a histori-

cal and technical perspective, and assets

which would be very difficult to replace.

As for Cook Inlet drilling, he said the

company will be fairly selective in its

drilling projects, particularly those target-

ing oil, with gas projects top tier for the

company.

Platforms going forward As for the fate of the platforms, the

first step when a platform is no longer

useful would be to plug the wells and

empty the vessels, things which need to

happen before a platform could ever be

removed, Saugier said, and also work

which lowers the risk from the environ-

mental perspective.

Hilcorp’s general intention is to leave

the platforms in place in lighthouse mode

for quite some time, he said, because a

critical mass is needed for platform

removal.

The platforms are very stable once the

wells have been plugged and vessels

emptied and Hilcorp is looking at possi-

ble uses for platforms no longer in pro-

duction, Saugier said. Cook Inlet is

ranked fifth in the United States for tidal

power and one of the things Hilcorp is

looking at whether the platforms could be

repurposed for tidal power.

The platforms were built like battle-

ships, he said, in a time before computer

modeling when they built stronger than

they thought they’d need.

And when facilities need expensive

work — such as replacement of the

pipeline at Middle Ground Shoal — the

company does work through whether to

replace the line or move to abandonment,

something Hilcorp works through that for

all of its assets, Saugier said.

Spartan 151 Paul Mazzolini, a drilling engineering

advisor for Hilcorp in Alaska, reviewed

Spartan 151 operations at North Cook

Inlet for the CIRCAC board.

He said work for the jack-up this year

involved plugging and abandonment

operations and then moving to the Tyonek

Platform for drilling.

Hilcorp mobilized the Spartan 151

from the Rig Tenders dock in early June

and moved to the 17589-1A well for P&A

work.

This well was drilled in 1962 as a

relief well for the North Cook Inlet dis-

covery well, Mazzolini said. The discov-

ery well was brought under control and

the 17589-1A was then drilled and tested.

Basically all the lower zones were aban-

doned before they got off the well,

Mazzolini said, but the surface cement

was not put in place for permanent aban-

donment.

That was the job this summer.

But this was vintage 1960s equipment,

and there were no longer any spares or

any real information, he said.

Hilcorp mobilized with a team of spe-

cialists for subsea work and also had Wild

Well Control, specialists in accessing old

wells and blowout locations. They bring a

different scope of expertise, Mazzolini

said.

Once they got onto the well they found

that the wellhead didn’t have functional

equipment needed and after trying to fix it

in Nikiski, Hilcorp sent it to Texas to get

help from a wellhead specialist to basical-

ly reverse engineer the equipment and

retrofit it so it would function for P&A

work.

Meanwhile, Mazzolini said, Hilcorp

moved the Spartan 151 jack-up to the

Tyonek platform, moved the rig onto the

platform and began drilling. One well has

been successfully drilled and a second is

being drilled. Since the equipment in

Texas won’t be available until about mid-

October, once the second well is complet-

ed the company will move on to drill a

third well.

The rig will then be moved back onto

the jack-up and the Spartan 151 will

move back to the P&A location to com-

plete that work. He said they expect to

demobilize by mid to late November and

move the Spartan 151 back to the Rig

Tenders dock.

Monopod oil pipeline Tasha Bacher, Hilcorp project engineer

for the Monopod oil pipeline replace-

ment, said that project was completed and

the pipeline has been restarted.

She said steps in the process included

acquiring necessary permits for the proj-

ect from federal and state agencies.

The 4,100 feet of pipeline was assem-

bled on the beach at Trading Bay in May.

It was then pulled from the beach to the

Monopod platform, using vessel

resources shared with the Spartan 151,

Bacher said. Once sections were in place

on the seafloor, about 45 days of diving

was required to do the tie-ins and once

divers completed the work, the cutover

into the existing line was done. She said

6 PETROLEUM NEWS • WEEK OF SEPTEMBER 19, 2021

continued from page 1

HILCORP ASSETS

see HILCORP ASSETS page 7

CISPRI (Cook Inlet Spill Prevention &

Response Inc.) had a vessel on site dur-

ing cutover, but there were no sheens

reported.

The project also involved observers

required by the National Marine

Fisheries Service to spot mammals, but

no mammals were encountered.

The pipeline was hydrotested at the

end of August to ensure all connections

were tight and the line was then restarted.

The line was replaced after an anom-

aly was detected during in-line pipeline

inspection of the 8-inch oil pipeline

between the Monopod and the Trading

Bay Production Facility. In a May

approval of Hilcorp’s application for a

miscellaneous land use permit for work

on state land the Division of Oil and Gas

said the section of line to be replaced

would be “de-inventoried, and the entire

pipeline will be flushed, and appropriate-

ly cleaned as part of the replacement

activities prior to cutting or disconnect-

ing sub-sea piping” with the replaced

section to be abandoned in place.

Bacher said most of the old pipeline

was buried.

Middle Ground Shoal Dan Polito, Hilcorp’s project manag-

er for the Middle Ground Shoal pipeline

replacement, said platforms A and C at

MGS have been shut-in since April of

this year when a leak was discovered in

the fuel line.

The Division of Oil and Gas

approved a suspension of operations and

production at the MGS unit in June.

Hilcorp shut down MGS in April, fol-

lowing discovery of a fuel gas leak; the

federal Pipeline and Hazardous

Materials Safety Administration is

requiring the company to replace the line

which runs between Platform A and

shore.

Polito said Hilcorp looked at alterna-

tives ranging from lighthousing the plat-

forms to repairing or replacing the gas

line. The company, he said, will do a full

replacement of the gas line, and will also

replace its sister 8-inch oil line. Two 8-

inch lines will replace the existing 8-inch

lines.

A lay barge will be used rather than

pulling the line from shore, the proce-

dure used for the Monopod pipeline

replacement, because of the 7-mile

length of the pipelines at MGS.

He said Hilcorp is working on plan-

ning, engineering and permitting for the

work, and plans to mobilize as soon as

the ice moves out of the inlet, probably

in late May. The pipe lay will take three

to four weeks, he said, followed by about

two months of pipeline stabilization, tie-

ins and commissioning.

Polito said Hilcorp hopes to have the

platforms back online about a year from

now. l

PETROLEUM NEWS • WEEK OF SEPTEMBER 19, 2021 7

WHATEVER

WHENEVER

WHEREVER

judypatrickphotography.comCreative photography for the oil & gas industry.

907. 258.4704

LAND & LEASINGState sets dates for fall areawide sales

The Alaska Division of Oil and Gas said Sept. 15 that bidding in its fall areaw-

ide lease sales — Beaufort Sea, North Slope and North Slope Foothills — will

begin Oct. 15 and close Oct. 28 with bidding results available to the public online

Nov. 3.

As in recent sales bidding will be through EnergyNet Services LLC, with bid-

der registration and bid submission at www.energynet.com.

For both the Beaufort Sea and North Slope areawide sales the minimum bid is

$25 per acre, the royalty rate 16.67%, the primary lease term 10 years and the

annual rental rate $10 per acre. For the North Slope Foothills, the minimum bid

is $5 per acre, the royalty rate is 12.5%, the primary lease term is 10 years and

rental rates are $1 per acre in year 1, $1.50 per acre in year 2, $2 per acre in year

3, $2.50 per acre in year 4, and $3 per acre for years 5-10.

Detailed sale information and tract maps are available on the division’s website

at https://dog.dnr.alaska.gov/Services/BIFAndLeaseSale.

—PETROLEUM NEWS

Vermont sues, alleges false climate info Vermont on Sept. 14 became the latest state to sue some of the country’s top fos-

sil fuel companies by alleging they misled the public about the impact their prod-

ucts have on climate change.

The state wants the companies to tell consumers that the use of fossil fuel prod-

ucts harms the environment, Vermont Attorney General T.J. Donovan said after

the lawsuit was filed in Vermont Superior Court in Burlington.

The warnings could be similar to those noting the danger of tobacco products

or food products that include nutritional and calorie information, he said.

Donovan, speaking outside the Chittenden County courthouse in downtown

Burlington where the lawsuit was filed, said they are not trying to prevent the

companies from selling their products in the state and that Vermonters will con-

tinue to be able to use fossil fuels.

“What we are saying is that Vermonters have the right to know,” Donovan said.

“Give Vermonters accurate information. Put a label on the product and let

Vermonters decide.”

The suit names ExxonMobil Corp., Shell Oil Co., Sunoco LP, CITGO

continued from page 6

HILCORP ASSETSHilcorp intends to extend the life of its Cook Inlet assets as long as possible, particularly the platforms, Saugier said,

calling them remarkable from both a historical and technical

perspective.

GOVERNMENT

see VERMONT SUIT page 8

downturn Sept. 9 sparked by a drawdown of

strategic reserves in China designed to quell

price appreciation by reducing the need for

imports.

But the indexes turned sharply higher on

Sept. 10, as Tropical Storm Nicholas made

its way toward the U.S. Gulf coast on the

heels of Hurricane Ida, which had already

disrupted oil and gas production in the Gulf

of Mexico.

ANS gained $1.40 Sept. 10 to close at

$72.97, while WTI gained $1.58 to close at

$69.72, and Brent gained $1.47 to closed at

$72.92.

Based on Sept. 15 operator reports, the

U.S. Bureau of Safety and Environmental

Enforcement estimates that 537,193 barrels

per day, representing 29.52% of the current

oil production in the Gulf of Mexico is shut

in, along with 39.40% of the gas production.

Prices began on an upward slope in early

trading Sept. 15, turning parabolic on an

announcement by the U.S Energy

Information Administration that U.S. crude

reserves had fallen to the lowest level since

September 2019.

On Sept. 13, 2019, U.S. crude reserves

fell to 417.1 million barrels. For the week

ending Sept. 10, reserves stood at 417.4 mil-

lion barrels, down 6.4 million barrels from a

week earlier, and down 78.6 million barrels

from a year earlier, the EIA said. Analysts

that answered a Reuters poll had expected a

draw of only 3.5 million barrels.

Total motor gasoline inventories

decreased by 1.9 million barrels to 218.1

million barrels, about 4% below the five-

year average for this time of year, the EIA

said.

OPEC calls for higher 2022 demand The Organization of the Petroleum

Exporting Countries has revised its esti-

mates higher for oil demand growth in

2022.

2022 oil demand is expected to “robust-

ly grow” by some 4.2 million barrels per

day, up 0.9 million bpd compared to

August’s assessment, OPEC said in its

September monthly oil market report.

Revisions were driven by both the

Organization for Economic Co-operation

and Development and non-OECD, as the

recovery in various fuels is expected to be

stronger than anticipated and further sup-

ported by a steady economic outlook in all

regions, OPEC said.

OPEC now projects oil demand in 2022

to reach 100.8 million bpd, exceeding pre-

pandemic levels.

The non-OPEC supply growth forecast

for 2022 is unchanged at 2.9 million bpd,

amid offsetting revisions, to average 66.8

million bpd, OPEC said, adding that the

main drivers of liquids supply growth are

Russia and the United States, followed by

Brazil, Norway, Canada, Kazakhstan,

Guyana and other countries in the

Declaration of Cooperation between

OPEC and allied producing countries.

The International Energy Agency and

the EIA increased their own estimates of

global oil demand growth in 2022, versus

their August reports. Those estimates

remain well below OPEC projections, with

IEA calling for growth of 3.24 million bpd,

and EIA calling for growth of 3.64 bpd.

Banks see likely price spike Investment banks are sounding the call

for higher prices in the near future, and

into 2022. Goldman Sachs Group Inc. said

oil will likely lead a rally in commodities

next quarter, citing strong demand and

“growing scarcity” of supply, according to

a Bloomberg report.

Jeff Currie, Goldman Sachs global head

of commodities research, said rising

demand, production deficits and depleted

inventories are leaving oil markets

“extremely exposed” to disruptions in sup-

ply.

“The potential for oil prices to explode

to the upside is increasing, particularly if

you don’t get Iran,” he said.

Investors are moving away from long

cycle investment because of poor returns

and uncertain forward visibility, in favor of

shorter cycle investment such as shale oil,

Currie said in a Bloomberg TV interview.

The paucity of long cycle projects could

lead to a significant supply crunch.

“What are you going to invest in when

the uncertainty around climate change is as

high as it is, and what technology is going

to be used?” he said. “We’ve discouraged

investment on a five to ten-year horizon,

and now we’re beginning to see the impli-

cations of that.”

Bank of America Corp. said a colder-

than-expected winter could push prices up

toward $100 at some point early in 2022.

A much colder than normal winter

could lead global oil demand to surge by 1

million to 2 million bpd, with the winter

supply shortfall easily exceeding 2 million

bpd in such a scenario, the bank said in a

Sept. 10 note.

“Downside risks include a new

COVID-19 wave, taper tantrum, a China

debt crisis, and the return of Iranian crude

barrels,” the bank said. “Having said all of

that, winter weather risk is quickly becom-

ing the most important driver of energy

markets.”

—STEVE SUTHERLIN

8 PETROLEUM NEWS • WEEK OF SEPTEMBER 19, 2021

SUPERIOR PUMPING & WELL TESTING SERVICES

littleredservices.com

continued from page 1

OIL PRICES

Petroleum Corp. and other corpora-

tions.

In a Sept. 14 email, Casey Norton, a

spokesperson for ExxonMobil, said the

suit was baseless and without merit and

they look forward to defending the

company in court.

Citgo declined to comment on pend-

ing litigation. The other two companies

did not immediately respond to

requests for comment.

The Vermont lawsuit seeks to pre-

vent the defendants from engaging in

what the suit alleges to be further

unfair or deceptive acts and practices.

“They have known for decades that

the Earth’s climate has been changing

because of emissions of CO2 and other

greenhouse gases, and that the fossil

fuels they sell are the primary source of

those emissions,” the lawsuit said.

Despite that knowledge, the com-

panies have continued to sell their

products in Vermont without inform-

ing consumers of the effect those

products have on their environment,

the suit said.

“They market fossil fuel products to

Vermont consumers by advertising that

use of their products is supposedly bet-

ter for the environment than other

products, while staying silent in the ads

about the continuing, significant con-

tributions their products actually make

to greenhouse gas emissions and cli-

mate change,” the suit said.

A recent report from the U.N.-

appointed Intergovernmental Panel on

Climate Change said global warming is

already accelerating sea level rise and

worsening extremes such as heat

waves, droughts, floods and storms.

The Vermont lawsuit was filed

under the Vermont Consumer

Protection Act, alleging the companies

misled the public about their actions,

not for any alleged environmental dam-

age.

The Center for Climate Integrity

says Vermont is the sixth state to file a

lawsuit against major oil and gas com-

panies related to their alleged role in

climate change. The District of

Columbia has also filed a similar suit.

—ASSOCIATED PRESS

continued from page 7

VERMONT SUIT

Contact Steve Sutherlin at ssutherlin@petroleumnews.com

PETROLEUM NEWS • WEEK OF SEPTEMBER 19, 2021 9

Oil Patch Bits

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Lynden first trucking company in Alaska to earn SHARP awards

Lynden Transport employees earned the prestigious title of being the first trucking company in Alaska to earn a safety and health achievement recog-nition program award from the Alaska Department of Labor Standards and Safety. The award is part of AKOSH, a program to promote safe and healthful jobs for Alaskans while recognizing employers who operate exemplary safety and health systems. Both the Anchorage and Soldotna service centers were assessed and found to meet or exceed OSHA’s safety and health guidelines.

According to HSSE Manager Richard Hennagin, Lynden Transport has worked with the group AKOSH Consultation and Training Services for many years. “This partnership, and a strong commitment from our management and operations teams, has led to improvements in the Lynden Transport safe-ty and health programs over the years,” he explains. “Employees in all departments have shown their commitment to improving the safety and health culture. When you consider that our people have been able to do all this in the conditions we endure — weather, traffic and a pandemic — it is truly humbling.”

For more information visit: info.lynden.com/blog.

CO

URT

ESY

LY

ND

EN

(3.6 degrees Fahrenheit), but preferably

to limit it to 1.5 degrees Celsius.

That study, also conducted by

University College London scientists,

looked at how much countries would have

to limit fossil fuel emissions to hold

warming to 2 degrees Celsius. They found

that a third of oil reserves, half of gas

reserves and 80% of coal reserves would

need to stay in the ground.

Emissions reductions proposed in this

latest study dramatically increase the

amount of fossil fuels that would need to

stay in the ground to meet Paris targets.

The study comes less than a month

after the International Panel on Climate

Change reported that the world will likely

cross the 1.5-degree-Celsius warming

threshold in the 2030s under five scenar-

ios of emissions reduction. Scientific con-

sensus is that any warming past 1.5

degrees Celsius could result in catastroph-

ic impacts, such as loss of species.

While acknowledging the IPCC

report’s grim outlook, Welsby said he

wanted to model a scenario that would

limit the worst impacts of climate change.

Importance of policy Dr. Philip J. Landrigan, editor-in-chief

of the Annals of Global Health, said the

paper underscores how important govern-

ment and corporate policy are in limiting

warming. “The nations and corporate enti-

ties need to readjust their targets and leave

oil, gas and coal in the ground if we’re

ever going to get there,” Landrigan said.

His journal was one of over 200 health

and medical publications that co-pub-

lished an editorial Sept. 5 calling on world

leaders to take emergency action to halt

global warming.

In the editorial, medical and public

health professionals highlighted the health

impacts already wrought by our changing

climate.

Dr. Renee Salas, who works in the

emergency department of Massachusetts

General Hospital, said she’s seen patients

come in with health conditions that have

been created or exacerbated by the climate

change impacts, such as heat stroke and

respiratory problems.

While everyone is at risk for adverse

health impacts from climate change, Salas

said, children, the elderly, the poor and

racial minorities are disproportionately

bearing the brunt.

Unequal impact A report the week of Aug. 30 by the

U.S. Environmental Protection Agency

found that poor people and people of color

will be impacted disproportionately by

severe heat, flooding and air pollution

caused by our changing climate.

Katharine Egland of Gulfport,

Mississippi saw her house nearly

destroyed by Hurricane Katrina in 2005.

The busy hurricane and storm season of

2020 cost her an additional $12,000 in

damages. And she spent most of her vaca-

tion this past week helping Gulf Coast

residents survive and recover from

Hurricane Ida.

As chair of the National Association for

the Advancement of Colored People’s

Environmental and Climate Justice

Committee, she’s seen firsthand how poor

and minority residents of the region suffer

from the impacts of climate change the

most.

While she welcomed the fossil fuels

findings of the new climate studies,

Egland said she is frustrated world leaders

haven’t taken more action to reduce

warming.

“Usually when these reports come out,

... frontline communities are like, ‘Okay,

we pretty much knew that,’” she said.

“And we advocate to keep it all in the

ground. And we keep listening to reasons

why that can’t be done, but we know it has

to be done.” l

continued from page 4

RESERVES STUDY

serving local communities along the

Railbelt corridor to support the installa-

tion of electric vehicle charging sta-

tions at appropriate spacings along the

road system.

Interestingly, Cooper Landing,

where a level 3 station is scheduled for

installation, does not have the requisite

three phase distribution network. The

vendor who is installing this station has

an ingenious solution to this problem

through the use of a supplementary bat-

tery system, Skaling said.

Most charging at home Skaling also commented that, with

most daily driving being within the

range of a single battery charge, most

people will charge their electric vehi-

cles at home. Level 2 “destination

chargers” at locations such as hotels

and campgrounds will also provide

convenience in topping up batteries, he

said.

In parallel with the ramping up of

electric vehicle charging station instal-

lation, the Regulatory Commission of

Alaska is considering a request by the

Railbelt electric utilities for changes to

commercial electricity tariffs, to

improve the economics of commercial

charging station operation. l

continued from page 5

CHARGING STATIONSSkaling also commented that, with most daily driving being within the range of a single

battery charge, most people will charge their electric vehicles at

home. Level 2 “destination chargers” at locations such as hotels and campgrounds will also provide convenience in

topping up batteries, he said.

back Canada’s oil and gas industry — that

bolster forecasts by several economists and

notably a report by TD Economics that by

2050 as many as 450,000 of 600,000 direct

and indirect oil and gas jobs could become

casualties of an enforced reduction in fossil

fuel output.

“There’s a role for governments to

ensure these workers aren’t forgotten and

left behind,” said Francis Fong, a senior

economist with TD and co-author of the

bank’s report.

TD said fossil fuel demand will not dis-

appear entirely, even in most net-zero emis-

sion forecasts.

But with the exploration, extraction and

distribution of oil and gas accounting for

more than 25% of Canada’s greenhouse gas

emissions, the industry is the prime target

for emission-reduction efforts.

Fong told the Globe and Mail it’s dan-

gerous to assume that displaced oil and gas

workers will find new jobs in the clean-

energy sector.

Industry increasingly threatened And the pressure on the industry keeps

building, with the International Energy

Agency calling for an end to new oil and

gas projects, coinciding on a single day

when three of the world’s mega-fossil fuel

companies — Royal Dutch Shell,

ExxonMobil and Chevron — lost court

cases or shareholder votes related to their

emissions records and plans.

But the Canadian government’s faltering

efforts to impose standards for net-zero

emissions by 2050 continually collides with

information gaps on the nature of the chal-

lenge and the difficulty of bringing together

a multitude of interests to achieve the target.

While confusion builds, the industry is

grappling with a flight of oilpatch workers

that imperils the demand for North

American oil.

Having faced three oil busts in the past

seven years, all resulting in hundreds of

thousands of layoffs, experienced upstream

engineers, rig hands and support workers

have decided they no longer want to be part

of what they view as a dying business.

Spending in the oil basins of the United

States and Canada has been forecast by

research firm Evercore ISI to drop by 7%

this year, despite the surge in crude prices,

while U.S. oilfield service workers lost an

estimated US$8.7 billion in annual wages to

COVID-19, according to the Energy

Workforce & Technology Council.

Limited help from government All of these trends suit the style of the

Canadian government, which would sooner

let problems resolve themselves than take

action.

But the administration has had its hand

forced in the current election campaign as it

comes under pressure from the growing

anti-petroleum factions in society.

The Trudeau Liberals finally intervened

earlier in September by pledging C$2 bil-

lion to help oilfield workers transition to

“greener” jobs through a Future Funds pro-

gram for Alberta, Saskatchewan and

Newfoundland as part of a pledge to ensure

those workers aren’t left to their own

devices as Canada pursues its climate-

change commitments.

That approach doesn’t get any support in

the core of Alberta’s oil sands such as Cold

Lake where more than 2,000 of the commu-

nity’s 15,000 residents are employed in the

sector’s operations.

Mayor Craig Copeland said he doesn’t

believe most of those employed in the oil

sands want to switch jobs, having already

watched their house values drop by 40%

over the past decade.

He said the Trudeau government’s pro-

posal for a “made-in-Canada” solution is

not grounded in reality.

“Until you find a way to replace (the use

of petroleum products) people won’t even

look at retraining,” Copeland said.

Gil McGowan, president of the Alberta

Federation of Labor, said climate change is

a reality his province needs to confront.

“We’ve had a great ride with oil and gas,

but the sector will never be the same engine

for economic growth that it was,” he said.

“Pretending that we can ignore the direction

that the world is heading to and go back in

time is not in the best interests of Alberta

workers.”

McGowan said his organization has

been lobbying for federal support of up to

C$20 billion a year to help producing

provinces and their workers diversify, call-

ing for federal money to fund green infra-

structure projects, training and apprentice-

ships in affected provinces. So far there has

been no response from Trudeau or his cabi-

net ministers with ties to employment or the

oil and gas industry.

—GARY PARK

10 PETROLEUM NEWS • WEEK OF SEPTEMBER 19, 2021

grounds for waterfowl and that sup-

ports Arctic wildlife such as caribou.

The IAP also, in effect, eliminated the

Colville River Special Area.

Proponents of oil development argue

that the use of modern technologies

such as extended reach directional

drilling significantly reduce environ-

mental impacts and that development

can take place safely and with minimal

environmental disturbance.

Environmental organizations vehe-

mently disagree.

Biden executive order On Jan. 20 President Joe Biden

issued an executive order for “protect-

ing public health and the environment

and restoring science to tackle the cli-

mate crisis,” DOI wrote. The order,

which set broad environmental poli-

cies for the federal administration,

directed all federal agencies to review

all agency actions promulgated,

issued or adopted between Jan. 20,

2017, and Jan. 20, 2021, to identify

any actions that may be inconsistent

with the new policy. Agencies must

consider whether any additional

actions are needed to fully enforce the

policy.

DOI says that it has not yet decided

whether to withdraw or replace the

NPR-A IAP, but that its initial assess-

ment indicates that the IAP is inconsis-

tent with the policy position set out in

the January executive order. The court

memo says that the department

believes that other alternatives may

better serve the administration’s policy.

Plan evaluation Consequently, DOI has directed

BLM to evaluate the IPA and its asso-

ciated EIS, to determine whether they

“remain adequate” under the National

Environmental Policy Act, the Alaska

National Interest Lands Conservation

Act and the Endangered Species Act.

The purpose of this evaluation is for

BLM to potentially adopt an alternative

to the IAP and EIS approved in 2020,

the memo says.

DOI requires BLM within 120 days

to “provide the status of its evaluation

and related actions.” Meanwhile, during

this period, BLM must not offer in oil

and gas lease sales any tracts that were

newly opened for leasing in the 2020

record of decision for the current IAP. l

continued from page 1

NPR-A PLAN

and recommended that shareholders vote in favor of the

merger in the absence of a superior proposal and subject

to an independent expert concluding that the merger is in

the shareholders’ best interest.

The takeover by Santos is subject to a limited number

of usual conditions including regulatory approvals,

Papua New Guinea court approval and, of course, share-

holder approval of both companies.

Santos’ offer is 0.6275 of its own shares in exchange

for each Oil Search share. Completion of the deal would

lead to Santos shareholders owning around 61.5% of the

combined company, and Oil Search shareholders holding

the remaining 38.5%.

Oil Search is Papua New Guinea's largest oil producer

and owns a minority stake in the Exxon Mobil Corp.-

operated PNG LNG gas-export project in the country,

which also counts Santos as an investor.

Oil Search owns undeveloped oil reserves in Alaska

that it hopes to develop if it and 49% partner Repsol can

sell up to a 30% stake split between them. Development

of the Pikka unit is first on Oil Search’s list of projects.

As previously reported in Petroleum News, Oil

Search is on track to reach a final investment decision as

soon as yearend if it picks up a satisfactory partner.

In his first briefing on the proposed merger, Santos

Managing Director and CEO Kevin Gallagher said he

would continue the sell-down process and would be

“more flexible” about giving up operatorship than Oil

Search has allegedly been with North Slope producer

ConocoPhillips.

Gallagher said in a Q&A session on Aug. 17 with ana-

lysts: “We’ll continue with Oil Search’s plan and we’ll

be very flexible on what that would look like in terms of

operatorship.”

Gallagher recently told Reuters he has a “very good

relationship” with ConocoPhillips and sees the company

as a “world class operator.”

ConocoPhillips is a likely bidder for Oil Search’s

Alaska North Slope assets because the company holds

most of the leases and infrastructure surrounding Pikka.

Plus, ConocoPhillips’ top executive Ryan Lance has

made it clear in recent financial presentations that his

company is interested in picking up oil and gas assets in

areas where it already operates, as long as the price is

right and the deal brings value to the company’s portfo-

lio.

Benefits of the merger The merger implementation deed signed by Santos

and Oil Search follows them each completing reciprocal

confirmatory due diligence which began Aug. 6.

Per Santos’ website, a merger between it and Oil

Search will create a regional champion of size and scale

with several benefits, including:

• Diversified portfolio of high quality, long-life, low-

cost assets across Australia, Timor-Leste, Papua New

Guinea and North America (Alaska) with significant

growth optionality.

• Pro-forma market capitalization … would position

the merged entity in the top-20 ASX-listed companies

and the 20 largest global oil and gas companies.

• Pro-forma 2021 production of approximately 116

million barrels of oil equivalent.

• Pro-forma 2P+2C resource base of 4,867 million

barrels of oil equivalent.

• Investment grade balance sheet with more than

US$5.5 billion of liquidity to self-fund development

projects, whilst maintaining further optionality and flex-

ibility to optimize the portfolio.

• Strong ESG credentials including maintaining

Santos’ net-zero emissions target by 2040, focus on car-

bon capture and storage projects and Oil Search’s social

and community investment in Papua New Guinea and

North America (Alaska).

Executive statements Oil Search Chairman Rick Lee said: “Put simply, this

merger provides Oil Search shareholders with a com-

pelling opportunity to participate in a larger entity with

significant scale, product mix, ESG and geographic

diversity, and access to capital. The combined entity

will have the capacity to deliver on an exciting pipeline

of organic growth opportunities.”

Santos Chairman Keith Spence said: “We look for-

ward to integrating our businesses to create one high

performing team — with a vision of becoming a global

leader in the energy transition.”

Merged company leadership The combined Santos and Oil Search will be led by

Gallagher, who said: “The merger will create a company

with a balance sheet and strong cashflows necessary to

successfully navigate the transition to a lower carbon

future with the combination of Santos’ leading CCS

capability combining with Oil Search’s ESG programs

in PNG and Alaska to provide a strong foundation.”

Following the completion of the merger, three non-

executive directors from Oil Search will join the Santos

board, which currently has eight directors.

Santos’ head office will remain in Adelaide,

Australia.

—KAY CASHMAN

continued from page 1

TAKEOVER TERMS

continued from page 1

GREEN TRANSITIONSpending in the oil basins of the United States and Canada has been forecast by research firm Evercore ISI to drop by 7% this year, despite the surge in crude

prices, while U.S. oilfield service workers lost an estimated US$8.7 billion in annual wages to COVID-

19, according to the Energy Workforce & Technology Council.

appraisal wells this coming winter,

including Narwhal or Harpoon wells,

Rebecca Boys told Petroleum News in a

Sept. 9 email. Boys is media and advertis-

ing director for ConocoPhillips Alaska.

That said, ConocoPhillips’s in-field

work, including development drilling, is

picking up on the North Slope.

Great Bear Pantheon will not be

drilling another well this winter, but it

will be re-entering its successful Talitha

A exploration well in order to recover

additional fluid samples.

That well was drilled and logged to

the base of the Kuparuk formation, with

sidewall cores taken from each potential

reservoir interval (Kuparuk, Lower Basin

Floor, Upper Basin Floor Fan sequences,

Slope Fan and Shelf Margin Deltaic hori-

zons). Although seasonal restrictions and

operational prudence did not allow time

for a flow test at all potential reservoir

intervals, a flow test was conducted at the

deepest of those intervals, the Kuparuk.

Merlin 2 to the east 88 Energy said Aug. 16 that although

it reserves the right to re-enter the Merlin

1 exploration well in the future, next year

in first quarter it will drill Merlin 2, an

appraisal well to the east and closer to the

shelf break where the company expects

“enhanced reservoir thickness and quali-

ty.”

88 Energy also said its post well eval-

uation of Merlin 1, which was drilled in

March to a depth of 5,267 feet in the

National Petroleum Reserve-Alaska, has

successfully demonstrated the presence

of oil in multiple stacked sequences in

the Cretaceous Nanushuk formation

(N20 and N18 targets). An additional

new target, the N19 sand, that was not

previously mapped, also returned a

strong hydrocarbon signature following

geochemical analysis.

Analysis indicated 41 feet of net log

pay across the three reservoir intervals,

which are in the Nanushuk Grandstand

sands.

These sands, 88 Energy said, show

close correlation to the Lower

Grandstand sands seen in 88 Energy’s

nearby Umiat field and petrophysical

analysis has returned 138 feet of possible

net pay.

In addition, 88 Energy said geochemi-

cal analysis of the cores from Merlin 1

established the “presence of a light oil

with an estimated API gravity between

mid-30 to low-40 API.”

Money in hand The company said Sept. 2 that it had

raised about $17.7 million ($24M

Australian) in a share placing to finance

Merlin 2. 88 Energy, which is the owner

of four Alaska operating subsidiaries —

Emerald House, Regenerate Alaska,

Accumulate Energy Alaska, Captivate

Energy Alaska — also said that with the

share placing it will have enough cash to

fund its working capital requirements

and general and administrative overheads

for at least 12 months.

“Completion of this placing positions

88 Energy strongly as planning and

preparations continue for drilling of the

Merlin 2 appraisal well,” said chief exec-

utive Ashley Gilbert.

88 Energy said it is also looking for a

farm-in partner for Project Peregrine,

which holds the Merlin prospect.

Lots of oil Incorporating Merlin 1 results into

Project Peregrine’s dataset, 88 Energy

revised Peregrine’s mean total prospec-

tive resource to an estimated 1.6 billion

barrels.

The objective of Merlin 1 was to

assess three independent Nanushuk reser-

voir targets — N14, N20, and N18 —

identified from reprocessed seismic data.

All targets came in considerably deeper

than expected.

Post well analysis indicated that the

N14 horizon, the primary target of

Merlin 1, was not intersected, as it was

believed to lie about 600 feet deeper than

the well’s total depth.

The company said N14 remains a tar-

get of interest for the future.

Merlin 1 was drilled by one of 88

Energy’s four Alaska operating sub-

sidiaries, Emerald House. All the sub-

sidiaries are run by long-time Alaska

geologist and innovator Erik Opstad.

Opstad used All-American Rig 111, a

lightweight, inexpensive portable rig that

did not require an ice road.

Merlin 2 pre-planning With Merlin 1, the company was look-

ing at proving up a gross mean prospec-

tive resource of 645 million barrels of oil.

With Merlin 2, 88 Energy is targeting a

net entitlement mean prospective

resource of 652 million barrels

(unrisked).

Three potential locations have been

selected for Merlin 2 and will be permit-

ted, the company said, with pre-planning

and rig selection under way.

Merlin 2 is designed to target the

thicker zones of reservoir intervals.

A potential infill 2D seismic program,

consisting of 343 line miles, has been

designed and costed, the company said.

Gilbert was quoted in the Aug. 16

report as saying: “We are thrilled with the

results from the Merlin 1 exploration

well. This is the best well we’ve drilled

on the North Slope of Alaska to date,

with light oil detected in the Nanushuk

across three separate horizons.”

88 Energy holds a 100% interest in the

Peregrine Project, which also includes

the Harrier prospect. l

PETROLEUM NEWS • WEEK OF SEPTEMBER 19, 2021 11

All-American Rig 111, commissioning. January 2021.

88 E

NER

GYcontinued from page 1

EXPLORATION WELLThere is an outside chance (no confirmation yet) that Eni US Operating Co. … will spud its

second Nikaitchuq North extended reach exploration well in second

quarter 2022.

12 PETROLEUM NEWS • WEEK OF SEPTEMBER 19, 2021

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